Aberdeen’s Funds Top 200 Billion Pounds on Artio, SVG Deals

By Peter Woodifield and Liam Vaughan -
Feb 14, 2013

Aberdeen Asset Management Plc, the
largest Scottish fund manager, announced takeovers of fixed-
income and private-equity firms that will propel assets above
200 billion pounds ($310 billion) for the first time.

Aberdeen agreed to pay $175 million for New York-based
Artio Global Investors Inc., a fixed-income specialist, the fund
manager said in a statement today. It will also buy 50.1 percent
of SVG Advisers Ltd., a London-based private equity fund-of-
funds manager, for 17.5 million pounds, boosting Aberdeen’s
assets in that segment more than sixfold.

Chief Executive Officer Martin Gilbert said the deals will
give Aberdeen better scope to attract money in the U.S. They’re
the first fund acquisitions the Aberdeen, Scotland-based company
has made since it bulked up with a string of purchases from
Deutsche Bank AG, Credit Suisse Group AG and Royal Bank of
Scotland Group Plc between 2005 and 2010.

“Half the world’s assets under management are in America,
and we believe we have the products to expand in the U.S.,”
Gilbert said on a call with reporters. “We would like to see
more assets coming into alternatives, property and fixed
income.”

The company had 193.4 billion pounds of assets at the end
of December. Aberdeen’s asset base is about eight times as large
as it was in 2005, before it bought about 46 billion pounds of
funds under management from Deutsche Bank followed by a similar-
sized purchase from Credit Suisse in 2008.

Baer Unit

The shares rose 2.5 percent to a 12-year high of 426.4
pence, lifting Aberdeen’s market value to 5.1 billion pounds and
extending its gain over the past year to 62 percent. The stock
was the second-best performer in the benchmark FTSE 100 Index.

Arun Melmane, an analyst at Canaccord Genuity Corp. lifted
his rating on the stock to buy from hold and increased his 12-
month price target to 460 pence from 400 pence.

“Both deals appear sensible,” Stuart Duncan, a London-
based analyst at Peel Hunt LLP who has a hold rating on
Aberdeen, said in a note. “Artio goes some way to address a
strategic imperative for Aberdeen, namely to build its U.S.
distribution capabilities.”

Following the takeover of Artio, Aberdeen will have about
23 percent of its assets in bonds, or more than 45 billion
pounds, Chief Financial Officer Bill Rattray said.

Assets Shrank

Artio’s assets shrank to $14.3 billion as of Dec. 31 from
$53.3 billion at the time of its initial public offering three
and a half years ago. Almost two-thirds of its assets, or $9.8
billion, are in bonds. Artio used to be the U.S. unit of Julius
Baer Group Ltd., Switzerland’s third-largest wealth manager.

Aberdeen is paying $2.75 a share for Artio. Shares of the
U.S. fund manager jumped 33 percent to $2.72 at 11:57 a.m. in
New York trading. The company first sold shares to the public in
December 2009 for $26 each.

“Artio has been a company in crisis for years,” Peter Lenardos, an analyst RBC Capital Markets with an outperform
rating on the stock, said in a note to clients.

Aberdeen said its net cost for the deal will be about $40
million as Artio is debt-free and has $136 million in cash and
seed investments. Some jobs at Artio are likely to be lost in
support functions, Gilbert said, declining to be more specific.
The transaction is due to close at the end of the second quarter
or early in the third, he said.

SVG Capital CEO Lynn Fordham will run the combined
business. Aberdeen has an option to buy the rest of SVG Advisers
in three years for between 20 million pounds and 35 million
pounds. Gilbert said Aberdeen would have preferred to have
bought 100 percent of the firm at once.

“It is important to get the value of the funds for SVG
investors over the period,” Fordham said in a telephone
interview. “We see great opportunities to grow the business
over the next three years.”

Fordham said she expects Aberdeen to pay the maximum price
when it exercises its option to buy the remaining stake.